InterContinental Hotels Group's (IHG) CEO Richard Solomons on Q2 2016 Results - Earnings Call Transcript

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InterContinental Hotels Group PLC (NYSE:IHG) Q2 2016 Earnings Conference Call August 2, 2016 9:00 AM ET

Executives

Catherine Dolton - Head of IR

Richard Solomons - CEO

Paul Edgecliffe-Johnson - CFO

Analysts

David Loeb - Robert W. Baird

Chris Agnew - MKM Partners

David Katz - Telsey Group

Operator

Good afternoon, ladies and gentlemen and welcome to the IHG Half Year Results Call.

My name is Indy, and I’ll be your coordinator for today’s event. For the duration of the call, you will be on listen-only. However, at the end there will be an opportunity to ask questions. [Operator Instructions] I will now hand you over to your host Catherine Dolton to begin today’s conference. Thank you.

Catherine Dolton

Thanks Indy and good morning, everyone. This is Catherine Dolton, Head of Investor Relations at IHG. I’m joined this morning by Richard Solomons, Chief Executive and Paul Edgecliffe-Johnson, Chief Financial Officer.

Before I hand over to them for the discussion of our results, I need to remind you that in the following discussion, the Company may make certain forward-looking statements as defined under U.S. Law. Please check this morning’s press release and the Company’s SEC filings for factors that could lead actual results to differ materially from any such forward-looking statements.

I’ll now turn the call over to Richard Solomons.

Richard Solomons

Thanks Catherine and good morning again everyone. Thanks for joining us today. Welcome to our 2016 interim results conference call.

Before we get started, I'll just spend a couple of minutes looking at IHG in the context of what's happening in the world right now. So in recent months has been considerable economic and political uncertainty, not at least because of Brexit, concerns about the stability of the European Union, more broadly the U.S. Presidential Election campaign and ongoing unrest in other parts of the world. And in the midst of this, we've seen an increase in terrorism with horrifying scenes in France, Belgium and Germany.

As a global business with a footprint in nearly 100 countries, managing through change in uncertainty is something we're very used to and it continues to be one of IHG's greatest strengths and this is underpinned by having a clear long term strategy, significant global scale, brands that have been coming through our guests and long term relationships with our owners.

So back to our interim results, before I hand over to Paul, I would like to share some highlights from the first half. We continue to deliver against our well established strategy, maintaining strong momentum for our brands and driving good growth in all of our key metrics.

3.6% net system growth, combined with solid RevPAR increases delivered underlying fee revenue growth of 5%. This top line growth was underpinned as ever by disciplined execution and a clear focus on costs. We continue to invest in key areas of the business, whilst growing our fee-based margin and generating significant free cash flow.

Reflecting this performance and our ongoing commitment to generating shareholder value, we have today announced a 9% increase in the interim dividend in dollar terms.

I'll now hand over to Paul who will talk in more detail about our financial performance so far this year and I'll return later to discuss execution against our broader strategy.

Paul Edgecliffe-Johnson

Thanks Richard and good morning, everyone.

We're pleased to report another good financial performance in the half, despite the uncertain environment in some markets. I'll focus my commentary today on our underlying numbers, which includes adjustments for owned hotel disposals, managed leases, significant liquidating damages and the impact of foreign exchange as this gives the clearest explanation of our financial performance.

We translated 5% of revenue growth into 10% operating profit growth by leveraging the scalability of our asset-light business and continuing our focus on disciplined cost management and productivity.

This is in order to increase our fee margin by 260 basis points year-on-year, while continuing to invest for further growth, but does also reflect that certain costs predominantly in our Americas franchise business will be more weighted towards the second half of the year.

Consequently, we expect our fee-based margin growth for the full year to normalize nearer to our long term average of 125 basis points. The slightly lower interest charge was due to increased levels of cash ahead of the $1.5 billion special dividend that was paid at the end of May.

Our effective tax rate increased by three points to 33%, but we do still expect for it to be in the low 30s for the full year. The weighted average number of shares decreased following the 5 for 6 share consolidation relating to the special dividend. In aggregate, the enabled us to increase our underlying earnings per share by 11%.

Looking now to our levers of growth, our hotels continue to operate at near record occupancies of almost 70%. So our comparable RevPAR growth of 2% was predominantly rate driven. Second quarter RevPAR accelerated from quarter one in each of our four regions with 2.5% growth for the group as a whole.

Across the half, we added 17,000 rooms and we removed 12,000 rooms as we continue to focus on enhancing the quality of our portfolio. This took our net system size up 3.6% year-on-year.

Turning now to our four regions and starting with the Americas where U.S. industry demand remained record highs and our revenue delivery systems are driving close to peak occupancy rates of almost 70%.

In this environment, we were able to deliver solid rate growth taking U.S. RevPAR up 2.1% with 2.6% growth in the second quarter. Our performance continued to be impacted by our overweighting towards the oil markets where RevPAR in the second quarter was down 6%, compared to the non-oil markets up almost 4%.

Underlying profit was up 9% with good growth in franchised and managed fees. This is aided by a $4 million year-on-year saving on U.S. healthcare costs, which we have now restructured to minimize any future fluctuations.

In addition, we had $5 million favorability in the phasing of franchise costs, which we expect to reverse in the second half. InterContinental New York Barclay reopened in April, following its extensive refurbishment. As expected, we did incur some costs ahead of the reopening. These totaled $4 million to date with a further $2 million expected in the remainder of the year as the hotel continues to ramp up.

We signed 20,000 rooms in the half including more than 100 holiday and brand family hotels in the U.S. We also opened 13,000 rooms, our fastest pace since 2011. To continue accelerating our signings pace and to support the opening of our part time hotels, as previously disclosed, we plan to invest a further $7 million primarily into strengthening our franchise development team.

We have been recruiting over recent months and we've now filled most of these positions. So expect to incur around $4 million of this cost in the second half with a further $3 million of animalization in 2017.

In Europe, we saw 2% RevPAR growth with mixed performances across the region. The U.K. provinces continue to trade well, London saw RevPAR decline, driven predominately by continued supply growth. Germany had a strong second quarter due to a particularly active trade fare calendar leading to almost 9% growth for the half. Unsurprisingly, trading continued to be tough in Paris where RevPAR was down almost 20%, although, the French provinces were up 7%.

This solid RevPAR performance along with almost 3% net system growth would have delivered underlying operating profit growth of 5%, wearing out for $2 million reduction in revenues in relation to three managed hotels.

Two of these have exited the system. These were older properties which were good fee earners, but did not leave up to our brand expectations. The third is an intercontinental in a key city, which is currently undergoing an extensive refurbishment. We don’t anticipate any further impact in relation to these hotels for the full year.

In Asia, Middle East and Africa, RevPAR declined 0.4%. The low oil price and the high level of supply growth in the UAE meant that RevPAR for the Middle East fell 8%. Excluding the Middle East, RevPAR for the region grew 4.3% with strong performance in several markets.

In Japan, the weaker yen drove increased international visitors and this together with strong domestic demand helped deliver almost 7% RevPAR growth.

Australia and Southeast Asia, both performed well up 4.5% and 2% respectively, the latter led by Vietnam, Thailand, and the Philippines. 8% net rooms growth and a solid RevPAR performance meant we achieved good underlying growth in our core managed business in the half but this is offset by $4 million revenue reduction in relation to four hotels.

One of these was an equity stake disposal and the other three were longstanding contracts renewed on more current commercial terms. Excluding these four hotels, underlying operating profit would have been up 2%. We expect a further $3 million revenue impact from these hotels in the second half.

Moving on now to Greater China where we drove an increase in fee revenue of almost 14% through 12% rooms growth combined with a solid RevPAR performance. RevPAR increased 2.4% for the half with Mainland China staying at 4.7% growth. This is driven by Tier 1 cities, which were up almost 7% led by Beijing and Shanghai benefiting from strong business trends and demand.

Tier 2 and Tier 3 cities delivered 3.4% RevPAR growth with strong leisure performance. Hong Kong and Macau were down 5% and 12% respectively for the quarter. Hong Kong continued to suffer from an industry-wide decline in inbound Chinese tourism and Macau continues to be impacted by the austerity measures implemented in China.

We've once again generated significant amount of cash from operations with underlying free cash flow of $241 million. Our growth CapEx of $108 million was covered 2.5 times by our underlying operating cash flows, with our permanently invested maintenance capital in key money covered more than seven times.

Our CapEx guidance remains unchanged at up to $350 million growth per annum and we expect our recycle investment to even out over the medium term, resulting in $150 million net per annum, but in the short term this type of expenditure will continue to be lumpy.

Looking ahead, we've been very clear that we continue to be committed to an efficient balance sheet and an investment grade credit ratings. This equates to net debt to EBITDA of 2 to 2.5 times and we're happy to be at the top end of this range in favorable economic conditions. Following the payment of the special dividend in May, we're currently around the midpoint of that range.

At the current time, economic conditions are favorable and we've just driven another half of double-digit underlying EPS growth. However, as you'll expect and given the uncertainty in some markets, exactly where we will feel comfortable within our gearing range is something we keep under constant review.

We will continue to maintain our disciplined approach going forward with the aim of striking the right balance between investing for growth and returning funds to shareholders.

I'll now hand back to Richard to provide you with more details on how we are driving our strategy.

Richard Solomons

Thanks Paul. At our Americas Strategy Presentation last month, I spoke about the powerful tailwinds that will continue to drive hotel revenue growth across the globe. These include growing disposable income and aging population and globalization of travel driven by low cost airlines and emerging market expansion and is the major branded hotel company such as IHG that are benefiting most in these positive trends.

Branded hotels are growing net share of the global hotel industry with 52% of industry revenues in 2015 up from 46% in 2003. We know that branded hotels appeal to guests as they're more confident of the experience they receive and the value they will get. They also appeal to owners due to the high returns achieved and the relative ease of obtaining debt and equity finance.

After all of this, the fact that hotels with powerful brands are more resilient for the cycle and this is why the big branded players such as IHG have been winning and will continue to win market share. This is something that IHG is both contributing to benefiting from.

Within this there is a clear distinction between the big five, due to the four branded players of which IHG is one and the rest, between us we have 19% of open rooms around the world, but some 60% of the active industry pipeline. This reflects the many advances of having enough scale confers including a portfolio of powerful brands and loyalty program, funds for sales and marketing, world-class technological capabilities and operations expertise across all key hotel markets and it means that IHG will continue to grow at a faster rate than the industry.

So there is a huge opportunity for IHG and our wining strategy optimally positions us to take advantage of this growth in the hospitality sector. Our preferred brands are the heart of this strategy and we have a strong balanced portfolio capable of meeting the principle needs of the vast majority of travelers.

But as in any branded business, we need to innovate to keep our brands fresh and relevant to drive higher levels of guest satisfaction and open up new avenues for growth.

So I’ll talk briefly now about some of the brand milestones we've achieved in the half. 2016 marks the 70th anniversary of the world’s largest luxury brand InterContinental Hotels and Resorts. This has been our best first half for both openings and signings for eight years for the brand, demonstrating its continuing appeal to both guests and owners around the world.

We also welcome back InterContinental New York Barclay after its major refurbishment. In its first few months of being open, its already commanding rates, some 35% higher than before it closed. The refurbishment has allowed us to access new parts of the market, for example, our greatly-expanded conference and banqueting space means we can cater to much larger groups than was previously possible.

Moving on now to Crowne Plaza and we're excited about the great strides forward we're making with this brand. As many of you will know, this is a highly successful brand throughout Asia and China and over the last few years, we sorted out the basics and cleaned up the portfolio in the Americas.

Now we are in a position to invest behind the brand to drive its success into the future and in June we announced the next phase of the refresh in the Americas. This will include new design and innovations allowing guests to work more flexibly, recognizing that the line between work and leisure is blurring.

This is another good half for our boutique brands where we continue to have a leadership position. One of the reasons we acquired Kimpton was its potential for international expansion. In January we signed the first hotel for the brand outside the Americas and this will be having in Amsterdam next year and just last week, we were delighted to be able to announce our second Kimpton signing for Europe and Paris, which is scheduled to open by 2020.

We're also building momentum for our newest brands. We signed a further Hualuxe Hotel in China in this historic City of Handan, bolstering the pipeline for the brand and we're planning more openings soon.

In July we opened our fourth EVEN Hotel in Brooklyn, our third-owned property for the brand. The pipeline for EVEN is now seven hotels strong and is completely asset light, demonstrating the potential that owners see for the brand.

Both EVEN and Hualuxe continue to receive great guest feedback with EVEN and Times Square, consistently voted in the Top 10 hotels in all of New York according to TripAdvisor.

Moving to the Holiday Inn brand family, world’s largest hotel brand by a factor of two, continues to power our growth. Holiday Inn and Holiday Inn Express are both driving great success and its vital to keep them fresh and relevant.

So we’re continuing to roll out our Formula Blue room design in the U.S. for Holiday Inn Express, which is mandatory for new signings and major refurbishments. And for Holiday Inn, our Open Lobby design for public areas is being rolled out in the Americas and Europe.

Both designs are delivering strong results, the Formula Blue driving double-digit increases in IHG and open lobby in Europe driving double-digit increases in both guest satisfaction and intend to return.

And it was a particularly strong half for holiday income vacations. Our asset lifetime share brand that we tripped in size since 2008 is fast becoming one of the highest growth vacation IHG brands in the U.S. We opened a record six new resorts in the half with almost 2,000 builders including properties in Texas and Orlando.

I’ll take a moment now to highlight progress we've been making in two important areas of our commercial strategy. Driving direct bookings is a core element of this strategy and our focus is paying off. Digital is our largest channel, delivering over 20% or $4.2 billion of our gross room's revenue per annum, up from just 12% in 2005.

Mobile in particular continues to thrive with revenue up more than 30% in the half, delivering almost $1.4 billion in the last 12 months, up from less than $50 million per annum in 2010. Furthermore mobile now drives more traffic to our website and desktop either from mobile visits to our website over our mobile app.

We're also driving significant step changes when it comes to loyalty. We’ve made some major and high profile enhancements to the program over the last two years, one of these being the launch of Spire Elite, our top tier membership level in July last year.

Following our pioneering and successful direction of pricing trial in Europe and Americas in 2015, in May we launched Your Rate by IHG Rewards Club. This provides exclusive preferential rates to loyalty members when booking to our direct channels and is now live in around 40 of 500 hotels across all of our regions except Greater China.

These initiatives are delivering some really encouraging results. We’re driving material increases in revenue contribution for both new and existing IHG Rewards Club Members. Enrolments are significantly up as are points redemptions, a strong sign that members are engaged with the program and since the launch of Your Rate, we're seeing a material two point shift in growth rate to direct web from OTA.

So to summarize, clearly there continues to be some macro uncertainty in the world at the moment, but IHG has a presence in almost 100 countries and we have one of the most resilient business models in the industry. Looking past this, the medium-to-long term drivers for the hotel industry and for a large global brand this hotel company like IHG remains compelling as ever.

We have a clear strategy that we're executing against in a disciplined fashion. We’ll continue to generate significant levels of cash, which will allow us to both investor growth and make ongoing returns to shareholders. We look forward to the future with confidence.

Thank you. So with that, Paul and I will be happy to take your questions. Operator let's move on to questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from the line of David Loeb from Baird. Please go ahead. Your line is open.

David Loeb

Good afternoon.

Richard Solomons

Hi David.

David Loeb

Hi. So Richard, you talked about the growth in the two points coming into Your Rates from OTAs. There has been a lot of discussion among owners about the near term impact of these kinds of direct booking initiative.

You guys were pretty open on that about that in the past. Can you just talk a little bit about how that trade off has gone and whether you think you're just giving essentially a discount to royal members relative to what they're paying today? Is it cannibalizing or do you think it’s already beginning to show up in greater net revenues?

Richard Solomons

Look I think from an owner's perspective if done right is extremely beneficial and certainly our owners are incredibly supportive of what we're doing. And as you know with the IHG Owners Association, we have a very direction ongoing dialogue both in the Europe and the Americas and heavily engaged with what we're doing in let’s just advising us and very supportive,

I think couple of ways to look at it may be differently to some of the commentary that’s gone out there. Firstly this is in a way a strategic move around driving very important channel. So, even if there were short term impact, which actually from a rate perspective we don’t see.

The fact that we are creating more loyal customers, driving heavily and driving enrolment into the Rewards Club at a net cost to owners which is substantiate is beneficial and we know over time and David we talked about this in the past and you know that Rewards Club members stay more and pay more than non-brand loyal guests. So it's got to be the right thing to do.

From an OTA perspective, it's very important and we've certainly pitched it this way and believe that OTA is a very important channel to us and it's not going away, nor do we want it to. It enables us to access price sensitive leisure travel very effectively with travelers who are not going to be brand loyal and we're never going to able to afford to access directly.

The issue is it's an expensive channel, so the business has to be incremental and profitable, otherwise its way too expensive. So we see them as very much not mutually exclusive. These are both channels that we want to pursue and they work very well and I think we're seeing -- we're seeing a benefit from it.

David Loeb

I totally understand the strategic initiative and agree with you, but it was really more about do you think there is some near term pain that's going on and it's something what you are saying is very little, am I hearing that right?

Richard Solomons

Paul, do you want to pick that?

Paul Edgecliffe-Johnson

Yeah, David what we found when we did our trial on this last year in the U.K. with Holiday Inn Express and then what we found since we launched you're right is that the additional revenue management capability that we have from having this new channel means that we can average up so that any discount that we would otherwise have seen, we're able to negate.

So the analysis that we do suggests that we are getting the same average rate as we would have done without the -- without Your Rate channel.

Richard Solomons

At a much lower cost.

Paul Edgecliffe-Johnson

Exactly.

David Loeb

At a lower cost, okay. Great. And more topic if I may, on the increase in the franchise sales step, when do you expect to see that start to pay dividends in terms of more epic pipeline?

Richard Solomons

Well these guys, the phase in this year and we're already signing it to the record levels and I think it can only help, but I think I’m not sure Paul would give any guidance on the increase in signing, but more feet on the street, we think absolutely will be beneficial.

David Loeb

Great. Thank you.

Richard Solomons

Thanks Dave.

Paul Edgecliffe-Johnson

Thanks Dave.

Operator

Thank you. Our next question is from the line of Christopher Agnew. Please go ahead, your line is open.

Chris Agnew

Thanks very much. Good afternoon.

Richard Solomons

Hi Chris.

Chris Agnew

On the strong unit growth in the first half of the year, I think we're normally -- is it fair to say you’ve normally seen stronger growth in the second half of the year. Can we assume that this year and have you seen any delays I think one competitor talked about some cancellations or at lease push outs. Thanks.

Paul Edgecliffe-Johnson

Thanks Chris. So you're right that a lot of the openings that we see typically will come through in the fourth quarter. And it will be the same again this year, but if you look at the 3.6% net room price increase that we, saw for the top, it's a comparison to the end of the first half of 2015. So it doesn’t include the rooms that got opened in the fourth quarter of 2015. But we would expect to see more of the rooms come through fourth quarter of 2016.

In terms of some of the commentary around the pipeline slowing down a little bit, but I've it's been in China and I think that some of our peers have a slightly different mix of hotels in the pipeline that in more of all this mid-scale and mainstream and getting built and get coming through well, we're continuing to see very strong room openings and very strong room signings in China.

So we’re already seeing it to you always will see the old hotel that becomes part of our project that slows or next year, so it might take a little longer, but nothing sort of systemic that will pull out.

Richard Solomons

Chris, I think I will add just to what Paul was saying is that I think our pipeline is of a higher quality than it's even been. And the nature I think of the markets that we're in today in many countries and the type of owners that we're working with is a very serious player.

And for us I know we talk about high quality growth and could be just about so, but it really isn't. We're very choosy about who we're going to do business with.

And David's last question about new developers coming into sign deals, we could sign a lot more deals if we were less discriminating. And I might say in the past we may be were but we're very careful now. So I'm not saying we're never going to be affected by also the economic environment and clearly if there's an economic downturn, we know that will be slow. But we are signing a lot of deals also in China signing an opening order we ever have.

And I think our diligence and our patience pays off because we're working with the owners who power through and we've certainly seen in China before that our competitors have been impacted by a lot of developers who require the sale of residential to fund hotel developments and we just have many few of those.

We're not saying we're perfect, we made mistakes, but I think on balance, it's a very high quality outcome we've got.

Chris Agnew

Got you. Thank you. And then maybe a follow-up to that, you talked about moving 12,000 rooms focusing on quality. Is there a point at which the overall quality of your portfolios had a point where the removal stats to slow down and is there a point you can sort of anticipate?

Richard Solomons

Well let me talk just philosophically and then Paul will pick it up, but in any multi-unit retail business, you're going to have some churn. You’ve got assets that age. You’ve got owners that change. You’ve got markets that change and if you think for removing 2% or 3% of our rooms, you're talking about on average a hotel being in 50 years in our system and that’s a long time.

And I think if you don’t remove that and we do have a higher removal rate than most of our mentioned competitors, you're ultimately going to be compromising in my view on your portfolio.

Just common sense will tell you that look at any retailer who churn their portfolios. So not to do it is great in the short term, but is extremely dangerous in the long term, Paul?

Paul Edgecliffe-Johnson

Yes I guess if anything I would add to that is we've talked about the changes we've made to some of our franchise contracts in the U.S. We've removed them from 10 years to 20 years with some stops along the way where there is mandated CapEx.

With longer term, I think will probably help us, we've talked about a 2% to 3% removals rate. Past couple of years it's been around the top end of that. So over time maybe we'll drop it down a little bit from that top end, but as Richard said, we will continue to take out rooms that are not, they're absolutely best quality, under the rams and we're pacing with others.

Chris Agnew

Okay. Thank you. And then little big of a housekeeping, you talked about fee-based margin increase 260 basis points and then did you say that the second half would drop back to a normalized rate of 125 basis points or was that for the full year?

Paul Edgecliffe-Johnson

For the full year, what we said is our long term is 125 basis points, that’s being the trend that we're seeing and so we would anticipate that in the second half, it will come closer to that. It might be a fraction ahead of that this year, but my comment was about the year as a whole rather than for the second half.

Chris Agnew

Okay. Great. Thank you very much.

Paul Edgecliffe-Johnson

Thanks Chris.

Operator

Thank you. Our next question is from the line of David Katz. Please go ahead. Your line is open.

David Katz

Hi. Good afternoon, gentlemen.

Richard Solomons

Hi David.

David Katz

So as I look at specifically the Americas and the unit growth, if I am reading correctly, it's a 12.7%, which is where it's been. And if I compare that with a couple of the other larger systems in the Americas, particularly in their limited service categories, their net growth is a little bit more than that.

Now my question is, is that a function of you being perhaps a bit more aggressive on the removals, which has it's positive aspects from an operating perspective or are there other dynamics in that numbers you sort of look at yours versus the other guys?

Paul Edgecliffe-Johnson

Yes, thanks David. So if you look at our gross openings, our gross openings are right up there with anybody's and in the Americas in the first half, we opened almost 13,000 rooms, but then we removed 10,000. And if that is a greater level of pruning that you're seeing from some of our competitors and it's still at broke. It's hotels that we've identified we want to leave as they continue to push up the overall quality.

So I think if you look on gross basis, lots of demand, lots of signings. We signed 20,000 rooms in the Americas in the first half, which here is very, very high level and over time as I said, we may bring down the removals level a little.

David Katz

Obviously adding developers will help so.

Paul Edgecliffe-Johnson

Absolutely yes.

David Katz

Right. And we're not necessarily directly prohibitive. Does that show up in RevPAR index or other operating metrics that you write the improved quality?

Paul Edgecliffe-Johnson

It does and it will over time absolutely. And if you look our RevPAR our share market by market then you definitely see it. But I think the share of revenue, market share was all driven by everything that we do and obviously what one removes in a particularly year is very small quantum, but over time absolutely will.

David Katz

Right. And I wanted to ask about the free cash flow and I'll admit that I've been on and off since this started. So I'll apologize if you discussed this already, but the $336 million is up considerably for the half. Can you explain how the dynamics work of that? I guess long-term partnership agreements and favorable phasing of tax payments what that is?

Paul Edgecliffe-Johnson

Sure, happy to into that and some of it might need to get into the nuts and bolts David. So always happy to do it offline. But we did get a -- we got a benefit in this half from a cash receipt, which relates to a couple of reasonably long-term contracts where the funds are effectively for the system funds, but we get the cash.

The system fund doesn’t have a separate balance sheet and separate bank accounts. So when we deploy capital on behalf of the system fund, we pay for it and then we get back the depreciation every time through the working capital line.

It will be the same with this long term contract, but we'll get the cash up front and then it'll effectively amortize back to the benefit of the system fund over time. And then in terms of tax, there is a few different components in that and try to explain all company's tax payers on a public, I know this is -- it always helps to -- but there is nothing out of the ordinary in that, nothing that’s not ordinary course.

David Katz

Got it. Okay, that's it for me for now.

Richard Solomons

Thanks, David.

Operator

Thank you. We have no further questions in the queue. [Operator Instructions]

Paul Edgecliffe-Johnson

Thanks. Operator, we'll call that a day. I think we've had a few questions and obviously everybody thanks for listening. If you got any questions please call the IR team here and we'll get back to you. Have a good day. Thank you.

Operator

Thank you for joining today's conference. You may now replace your handsets.

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